tracing reputation risks in retailing and higher-education services
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Journal of Retailing and Consumer Services 20 (2013) 207–217
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Tracing reputation risks in retailing and higher-education services
Kati Suomi a,n, Raija Jarvinen b
a Turku School of Economics at the University of Turku, P.O. Box 170, 28101 Pori, Finlandb National Consumer Research Centre, Finland
a r t i c l e i n f o
Article history:
Received 16 March 2012
Received in revised form
6 November 2012
Accepted 18 December 2012Available online 29 January 2013
Keywords:
Reputation risks
Retailing
Higher education
Universities
Services
89/$ - see front matter & 2012 Elsevier Ltd. A
x.doi.org/10.1016/j.jretconser.2012.12.003
esponding author. Tel.: þ358 505200790.
ail address: [email protected] (K. Suomi).
a b s t r a c t
The study contributes to the literature on reputation risks in presenting a new theoretical framework
and new empirical findings that improve both theoretical and practical knowledge, especially in the
areas of retailing and higher-education services. A further aim is to compare reputation risks in these
service sectors. One way of examining such risks is to categorise them as internal or external, and
further as positive or negative. The main contribution of the paper is empirical in terms of identifying
the actual reputation risks facing organisations operating in the two service sectors.
& 2012 Elsevier Ltd. All rights reserved.
1. Introduction
‘‘It takes twenty years to build a reputation and five minutes todestroy it.’’ This is how Warren Buffet, CEO at Berkshire Hath-away, describes reputation risks (Gaultier-Gaillard and Louisot,2006, p. 425). According to Murray (2003, p. 142), ‘‘reputationalrisk is now considered the single greatest threat to businessestoday’’, and yet it is not managed properly in most companies (seealso Rayner, 2003; Webley, 2003). Unfortunately, as Fombrun andvan Riel rightly state (1997, p. 5), ‘‘reputations are seldom noticeduntil they are threatened’’. Furthermore, O0Callaghan (2007)argues that reputation risks are the most serious of all the risksfacing an organisation as they may damage it in its entirety, andovercoming them is usually rather expensive and difficult. It isclear from the above statements that the issue is of the utmostimportance for all kinds of organisations, and therefore deservesmore thorough investigation.
Earlier literature on reputation risks seems to bundle differentindustries together, but as O0Callaghan (2007, p. 110) argues, ‘‘onesize does not fit all’’ in terms of risk management: differentindustries face highly varying issues. Reputation and its asso-ciated risks affect services in particular given the inherentintangibility (e.g., Nguyen and LeBlanc, 2001). The sector is alsoextremely diversified, which is why we focused on two noticeablydifferent contexts, retailing and higher education, representingthe private and the public sector, respectively.
ll rights reserved.
Thus far, with the exception of the study of Power et al. (2011)on higher education, there has been a lack of attention to theabove-mentioned sectors in the research on reputation risk,although it is mentioned in some reputation-related studies inthese areas (Sullivan, 2000; Theus, 1993). The objective in thisstudy, therefore, is to narrow the gap in the literature through theintroduction of a new theoretical framework and the presentationof empirical findings that enhance both theoretical and practicalunderstanding of reputation risks in retailing and higher educa-tion. A further aim is to compare the risks in retailing andeducation services in particular.
As Csiszar and Heidrich (2006) note, the literature on reputa-tion typically focuses on firm-level rather than industry-levelquestions, although risks are identifiable on both levels (cf. Aula,2010). This study focuses on reputation risks on the organisa-tional rather than the industry or individual level. The otherlimitations of the study are discussed at the end of the article.
The article is organised as follows. Section 2 gives the theore-tical background of the study, Section 3 discusses the retailingand education sectors in Finland, Section 4 describes the datacollection and methods of analysis, and Section 5 presents theresults. The conclusions are drawn in Section 6, the limitations areexplained, and suggestions for future research are given.
2. The theoretical setting
Reputation risks differ from other types of risk in that they area purely ‘man-made’ product of social interaction and commu-nication (Power et al., 2011). Academic research on the issue
Internal External
Positive
Negative
Fig. 1. A framework of reputation risks in retailing and higher-education.
K. Suomi, R. Jarvinen / Journal of Retailing and Consumer Services 20 (2013) 207–217208
dates only from the 1990s (Gaultier-Gaillard and Louisot, 2006),and has thus far attracted scant attention in the service literature.Published articles typically concern financial (e.g., Scandizzo,2011; Xifra and Ordeix, 2009) and insurance services (Eccles,2006; Forstmoser and Herger, 2006; Gaultier-Gaillard and Loui-sot, 2006; Stewart, 2006), as well as place branding and tourism(Coaffee and Rogers, 2008), and thus far there is limited academicresearch with regard to other service sectors. Moreover, theemphasis has been clearly on theoretical rationalisation (e.g.,Scandizzo, 2011; Scott and Walsham, 2005), and empiricalresearch is largely non-existent.
In this article we adopt the definition of reputation risks putforward by Fombrun et al. (2000, p.88) as ‘‘the range of possiblegains and losses in reputational capital’’. We also assume thatthey cover ‘‘threats that have the potential to undermine acorporation’s ability to function as a commercial enterprise andimpair its standing in the community’’ (O0Callaghan, 2007, p.109). More concretely, we refer to reputation risk as ‘‘any action,event or circumstance that could adversely or beneficially impacton an organisation’s reputation’’ (Gaultier-Gaillard and Louisot,2006, p. 431). However, many such risks arise from economic andsocial factors beyond the organisation’s control, even outside ofthe industry (cf. Csiszar and Heidrich, 2006).
The above definition has both positive and negative connotations,as does the construct of reputation (Bailey, 2005). Like any other risk,reputation risk is rather negatively flavoured, but in many cases itmay lead to success or unexpected earnings and in that sense couldalso be considered positive (cf. Suominen, 2003). Accordingly, apositive reputation is a powerful mechanism for maintaining orenhancing competitive advantage (Fombrun and Shanley, 1990),whereas a negative reputation may lead to distrust and avoidance(cf. Markwick and Fill, 1997). Navigating out of a negative circle is notan easy task, the key factor being how the directors and other officersbehave in handling the crisis (cf. Gaultier-Gaillard and Louisot, 2006).
In one of the very few attempts to categorise reputation risks,O0Callaghan (2007) distinguishes between those that are socialand political in nature, and those that are commercial orbusiness-related (Table 1).
Social and political risks are external to the organisation andinclude issues such as environmental standards, the exploitationof labour, human-rights abuses, corruption and litigation insti-gated by stakeholders. Commercial and business risks, in turn, areinternal to the organisation and relate to product recall, servicefailure, bad behaviour, poor strategic decision-making, and gov-ernance and security issues (O0Callaghan, 2007).
Scandizzo (2011) also describes drivers of reputation risks asinternal or external, although the content differs somewhat from
Table 1Elements of reputation risk (O0Callaghan, 2007, 109).
Social and political Commercial
� The environment
� Exploitation of labour
� Indifference to the health and safety of
workers
� Cultural and religious insensitivities
� Race and gender
� Complicity in human rights abuses
� Lack of concern for local issues
� Inappropriate of inadequate response
during a crisis event
� Indifference to human suffering
� Corruption and bribery
� Product failure/recall
� Poor advice and service
� Fraudulent activities
� Poor governance and
decision making
� Intervention by regulatory
authorities
� Litigation by stakeholders
� Unethical behaviour towards
competitors
� Infighting/disarray of the
Board of Directors
� Security-related issues
� Poor policy or strategic
decision making
O0Callaghan’s categorisation: the former refer to risks that areattributable to people, processes and systems and affect theorganisation’s ability to fulfil stakeholders’ expectations, whereasthe latter relate to failings in other actors that reflect badly on agiven organisation in the eyes of stakeholders. In this article wefollow O0Callaghan’s division between external and internal risks,as discussed above.
In conclusion of this theoretical discussion, we present ourframework of reputation risks categorised as external or internal,and as either positive or negative (Fig. 1).
Scandizzo (2011) and Csiszar and Heidrich (2006) identify aninterconnection between reputation risk and asymmetric infor-mation, meaning that outsiders such as customers assess organi-sations and their performance on the basis of rather limitedinformation and with no inside knowledge, trusting externalsources such as the media. Thus, the company’s reputation playsa key role in compensating for a lack of knowledge.
Stakeholders are considered the most worthy evaluators ofreputation and reputation risk (Ou, Abratt and Dion, 2006).(Scandizzo, 2011, p.18) describes reputation risk as ‘‘a functionof the gap between stakeholder expectations and the company’sperformance’’, and Fombrun et al. (2000, p. 88) even suggest that,‘‘since reputational capital depends on stakeholder support, eachstakeholder group is a source of reputational risk to be managed’’.According to Schanz (2006), reputations can be managed in twoways: (1) by focusing on improving corporate performance, or (2)through stakeholders that rely on secondary sources such as themedia, without necessarily having any direct interaction with theorganisation itself. However, Stewart (2006) points out that anorganisation’s own behaviour may be an even more serious threatto its reputation than the media, but that a lot can be done toinfluence it (Forstmoser and Herger, 2006).
Bebbington et al. (2008; see also Hogan and Lodhia, 2011) notethat many organisations try to manage their reputation risks interms of corporate social responsibility, but we argue that this isnot enough and agree with Davies (2002, p.414): ‘‘Reputation riskmanagement can only be effective if it operates holistically – notas a specialist function to be activated in an emergency but as amajor influence on the organisation’s actions, behaviour andstandards.’’ Indeed, Dowling (2006) identifies the same problemof crisis-driven risk management.
3. Retailing and education in Finland
Our study was conducted in the contexts of retailing and highereducation. Retailing is an essential element of Finnish commerce.Commerce in total employs 310,000 people and generates over 10per cent of Finland’s GDP (Federation of Finnish Commerce, 2012).In spite of the increasing electronic trade and multichannel oppor-tunities there are still slightly over 30,000 retailing stores around thecountry employing 140,000 workers in total. The trend is towardslarger retailing entities: there are 350 department stores, and storescovering areas larger than 1000 m2 have a 65-per-cent market share(Finnish Grocery Trade, 2011–2012). The total number of shoppingcentres is 80 with sales of five billion euros (13.7% of retail sales) and326 million visitors annually (Finnish Shopping Centers, 2012).
Table 2The informants in higher education.
December 2010Student respondents (S 1-32)
September–October 2011A representative of a regional development agency (I4b)
Planning officer (I5b)
Planning officer (I7b)
Professor (I1b)
Professor (I3b)
Professor (I6b)
Researcher (I10b)
The director of the University Centre (I2b)
The head of development at the School of Economics (I8b)
The marketing manager of the University Centre (I9b)
K. Suomi, R. Jarvinen / Journal of Retailing and Consumer Services 20 (2013) 207–217 209
There are two key domestic players in Finnish retailing, theS-Group and the K-Group, which together cover almost 80 percent of the market. Behind these two come Lidl and SuomenLahikauppa, both with less than a 10-per-cent market share. Allfour chains have their own private labels accounting for over 10per cent of their total sales. (Finnish Grocery Trade, 2011–2012)
Finland has a reputation for excellence in the Programme forInternational Student Assessment (PISA) evaluations, and in termsof primary education is ranked first among the 139 countriessurveyed (WEF Global competitiveness report, 2010–2011). Thecountry’s university system is also renowned for its high stan-dards, egalitarian principles and lack of tuition fees. Since theUniversity Reform of 2010, however, academia is required toobtain some funding from private sources. Universities focus onresearch and research-based academic education, and awardBachelor’s, Master’s, licentiate and doctoral degrees. Of thecountry’s 16 universities, 14 are public organisations and twoare foundation universities. University Centres operate in areaswithout a university and coordinate activities in the regions(Ministry of Education and Culture, 2012).
4. Data collection and methods of analysis
The authors of the article conducted all the research work fromthe research design and data collection to the data analysis, and inthis we followed the steps suggested by Cresswell (2003). Theempirical data on retailing was gathered from various shoppingcentres in Southern Finland. First, a total of 18 semi-structuredinterviews (Eriksson and Kovalainen, 2008; Silverman, 2005)were conducted in three centres, nine with sales staff and ninewith shop owners or managers. The interviews took from 45 to70 min. Second, a survey comprising 170 statements was drawnup based on the interviews and the extant literature. Examples ofstatements linked to reputation risks in retailing include amongothers:
�
The store’s range of goods includes products that are soldduring economic downturns � Economic downturns threaten the survival of the store � Products are repaired under warranty � There are enough waste-disposal units in the shopping centre � The employee-satisfaction ratio is regularly measured � Employees have equal opportunities to move to another job inthe store
Contrary to normal practice, the researchers and respondentscooperated in filling in the questionnaire. This allowed importantitems to be discussed in depth, and ensured that the respondentsunderstood the statements properly (see Jarvinen and Suomi,2011). Sapsford (1999) recommends the use of an interviewer ifthe questions are complex, exacting or numerous. At this stagethe participants included 31 shop owners and managers in eightshopping centres. They represented different store types: sevendepartment stores, five food stores and 21 non-food stores:footwear (7), sports equipment (6) and electrical goods (8).
In the higher-education sector the first stage of the datacollection comprised a survey of Master’s degree students spe-cialising in the management of creative processes and creativefields of business. The two-year programme in question is acollaborative inter-departmental venture involving two universi-ties situated in Finland: a school of economics and a departmentof art and media. It is run from a University Centre (UC), which isan umbrella organisation covering the universities operating inthe area. Thirty-two students on the programme in 2010 filled inquestionnaires comprising 33 open-ended questions. During the
second stage, the empirical study was extended to other partieswho were heavily involved in the programme. Semi-structuredinterviews were conducted with one external and nine internalstakeholders in September and October 2011 (Table 2). Theinterviews lasted between 22 and 62 min.
The questionnaire and the interview protocol used are pre-sented in Appendices A1 and B1.
Participant observation (Iacano et al., 2009; Zahle, 2012) wasalso used in the higher-education context: one of the authors ofthis article has been working in one of the departments organis-ing the Master’s degree programme since 2008. She was able toobserve the discussions between the staff and students in class-room situations as well as in other meetings between autumn2009 when the first students started their studies and October2011 when the data gathering for this article ended. This is in linewith (Zahle’s, 2012, p. 54) suggestion that a social scientistconducting participant observation should ‘‘take notice of theindividuals she studies as they act and interact with each otherand their surroundings’’. Observational notes (Cresswell, 2003)were taken on those occasions or soon afterwards. Observationdata was used to complement the data gathered in the interviewsand the survey.
As Walker (2010) argues, it is almost impossible for one studyto cover the perceptions of all stakeholders. Thus the presentstudy focuses on some of the key stakeholder groups in bothretailing and higher education. In the former case the respondentswere sales staff, shop owners and shop managers, and in the latterthey were students and employees (cf. Ali-Choudhury et al., 2009;Judson et al., 2009; Vidaver-Cohen 2007).
The interview and observation data were content-analysed(Elo and Kyngas, 2008; Goodman, 1999; Neuendorf 2002), and thesurvey was subjected to database analysis (e.g., Patton, 1990). Thetwo sets of data were both complementary and confirmatory inpart (see Janesick, 1994; Richardson, 2000). The first step was tolist the identified risk items and label them, and the second was tocategorise them in line with the framework in Fig. 1, as Elo andKyngas (2008, p. 108) suggest (see also Hsieh and Shannon, 2005).We used the labels as codes. Later we double-checked the dataand confirmed the connection of the listed items to the constructof reputation risk. We drew up Table C1 and D1 during this phasein order to show examples of the linkage between the authenticdata gathered in the interviews and surveys and the resultspresented in Tables 3 and 4. However, the limitation of thequotations is that they are selected examples representing thecontent of the reputation-risk construct. The original data isricher, but in many cases the respondents shared the same orsimilar ideas or experiences of the reality.
The last step entailed comparison and interpretation.Gummesson (2005, p. 312) emphasises comparison in qualitative
Table 3Reputation risk categories in retailing.
Internal External
Positive Products Changing customer purchasing behaviourProduct guarantees and recycling Changing product ranges
Fresh and high-quality products Customer feedback
Inventories
Personnel capability LocationEmployee training Location in city centres or rural areas
Service orientation and honesty Number of potential customers in the neighbourhood
Status of the area
Leadership & working climate Shopping-centre physical spaceResponsibility and co-operation Space design
Discount policy Security guards
Quality of work Shopping-centre brandingService recoveries Public events
Capacity management Joint information and advertising
Surveillance systems Store networkLocking devices Within the shopping centre
CCTV, door alarms, product alarms Within the retailing chain
Fire alarm systems and fire walls
IT safety TransportIT policy Access by car, parking space
Reporting, controlling & auditing activities Public transport
Shopping-centre estate and its maintenanceConstruction and yard maintenance
Waste management and cleaning
Negative Store design and maintenance Negative economic trendsLabyrinthine store space Decreasing numbers of customers
Limited store space Fewer single purchases
Inadequate lighting Bargain behaviour
Broken or out-dated store equipment
Well-being and ergonomics CompetitionWork accidents Competition within the shopping centre
Stress and time pressure Competition outside the shopping centre
Poorly organised routines
Peak periods
IT safety ShopliftingHacking and information leaks Professional gangs
Failure of the till system Non-professional laypeople
Disruptive customersLoitering groups
Problematic persons
Shopping-centre estatePower cuts
Water leakage
Negative publicityFalse alarms
Bomb threats and other disruption
K. Suomi, R. Jarvinen / Journal of Retailing and Consumer Services 20 (2013) 207–217210
research: ‘‘Data are compared with data, with existing theory, andwith results from previous research’’. Here, we compared bothdata sets against theoretical models (O0Callaghan, 2007;Scandizzo, 2011) and discussed them in relation to the resultsof previous studies. Furthermore, Section 6 compares the mainresults from retailing and higher education, but otherwisecomparative analysis (e.g., Ragin, 1989) was not used as amethod in this study in its present form: a thorough compara-tive analysis might well reveal new information about thephenomenon.
The quality of a study can be evaluated in terms ofreliability and validity. However, the literature on qualitativemethods emphasises uniqueness, and argues that replicabilityin the traditional sense is pointless (e.g., Janesick, 1994;Gummesson, 2005). Moreover, reputation as a construct isclosely connected to societal values, which change over time.Thus, only studies conducted during the same period of timecan be replicated, and dissimilar values in some other periodwill affect the results accordingly. Validity in this studyrefers to the fit of the theory, the model, and the concept orcategory with reality (Gummesson, 2005). We developed our
framework on the basis of the earlier literature and cate-gorised our empirical data accordingly and without difficulty,and in this sense the data reflecting the reality fitted theframework rather well. We confirmed the accuracy of thefindings by various means including peer debriefing and datatriangulation (Cresswell, 2003).
5. Results
5.1. Reputation risks in retailing
The analyses identified internal and external sources of repu-tation risk. Internal risks appear to originate inside the storewhereas external risks arise from society and the shopping-centreenvironment. Both types of risk could be perceived as eitherpositive or negative in nature (Table 3).
Table 3 presents the categories of reputation risk, especially instores located in shopping centres. The content of the categories issummarised below.
Table 4Reputation risk categories in higher education.
Internal External
Positive Student network PublicityStudents from different backgrounds form a reciprocal network during their studies Positive publicity in newspapers and other media
ServicesPersonal study counselling
Uniqueness LocationNew combination: business and art Strong support from the host town and local stakeholders
The town is known for its cultural events
Duration Informal communicationPossibility of communicating and acting in networks to enhance awareness of the
programme among employers, the business community and prospective students
Positive word-of-mouth
Services Co-brandingPersonal study counselling Close cooperation with a major cultural event arranged in the
host town. Brand synergy from the event’s strong brand.
Brand support for the programme from the organising
universities’ brands.
EmploymentGood career prospects for graduates
Negative Quality ResourcesVarying quality of teaching Shortage of financial resources
Lack of well-organised research and long-term publishing Shortage of teaching resources
Services Informal communicationInsufficient study counselling Negative word-of-mouth
Expectations DurationExpectations–experience gap among students Lack of awareness of the new programme among employers, the
business community and prospective studentsExpectations–experience gap among other key stakeholders
Leadership PublicityLack of a strong figurehead Negative publicity in newspapers and other media
Fraud Locatione.g., plagiarism Distance from the capital and other big cities
Strategy Difficult transportation links
The programme’s weak position in the organising universities’ strategy The host town is not a traditional university town, the host town
is considered somewhat boring
Conflicts EmploymentInterpersonal conflicts between the staff Weak career prospects for graduates
UniquenessFailure to deliver truly unique content, insufficiently innovative teaching methods and
curricula
UncertaintyFuture of the key personsFuture of the whole programme
ProvincialityWay of thinking, acting and networking
InternationalityProblems with producing courses in EnglishLack of international awareness
K. Suomi, R. Jarvinen / Journal of Retailing and Consumer Services 20 (2013) 207–217 211
5.1.1. Positive and negative internal reputation risks
Fresh and high-quality retail products constitute the basis ofpositive reputation risks leading to increased sales in the currentclimate. Comprehensive guarantees and recycling services com-plement core products, and inventories make it easier to maintainadequate product levels. In addition to this, every store requirescapable personnel with a true service orientation, effectiveleadership and a positive working climate that encouragesemployees to co-operate and work hard and to maintain apositive attitude – in other words enhances the quality of work.Related to the above, service recovery represents the mostchallenging work in maintaining a high quality and at the sametime a high reputation in the eyes of customers. Moreover, theatmosphere in the store, the service and the employees increaseshopping value the most, as Cottet et al. (2006) also recognise.
A safe environment is a prerequisite in retailing, given theincreasing amount of shoplifting, robbery and other problematicbehaviour (see e.g., Bamfield, 2009; Hayes, 2007). Many retailersinstall sophisticated CCTV surveillance systems (see Kajalo andLindblom, 2010), which sales personnel in particular tend to trust(Jarvinen and Juvonen, 2010). An IT safety policy incorporatingstock control and auditing enhances the feeling of positive risk.However, according to Kajalo and Lindblom (2010) but contraryto the perceptions of Bamfield (2009), for example, some retailers
believe that surveillance systems have a negative impact oncustomers’ feelings of security.
We also found three negative categories of internal risk: storedesign and maintenance, employee well-being and ergonomics,and IT safety. Despite the generally positive views of IT safetyamong the respondents, there was awareness of potential hackingand other criminality, especially concerning the leaking andpublication of confidential information.
Space is a problem for many stores. Modern shop furniture andequipment require extensive financial resources, and expendituretends to be postponed in a weak economic climate. Moreover,technical devices need regular servicing, which is often neglectedwhen business as a whole is booming.
5.1.2. Positive and negative external reputation risks
The study identified more external than internal reputationrisks. Perhaps the most significant of these concerned the need tofollow customers’ purchasing behaviour and to react immediatelyto changes. The recent recession caused a decline in the sales ofluxury products and a decrease in single purchases in all thestores involved in our study. In addition, vast numbers ofcustomers moved to cheaper product lines and responded moreactively to bargains, and some even gave up shopping.
K. Suomi, R. Jarvinen / Journal of Retailing and Consumer Services 20 (2013) 207–217212
The location of the shopping centre may protect stores from orexpose them to reputation-damaging risks: a city-centre location,for example, carried a higher risk of disturbance than a locationfurther afield. Moreover, the status of the neighbourhood and thenumber of potential customers are critical in assessing thelocation as positive or negative in this respect. Transport isanother critical factor: easy access by car and large parking areasattract families, whereas public transport tends to bring in moreproblematic clientele in general (see also Lee et al., 1999).
The shopping centre is a key player in the changing game ofretailing and consumerism: it offers a dedicated space withinwhich to meet the requirements of the highly discerning shopperthat go far beyond buying what he or she actually needs (Beck,2010). This cathedral of consumerism, as Beck (2010) calls it,relies on architecture and interior design, but also on safety,otherwise some customers will start to avoid it (Gips, 1996;Hayes, 2007). Security guards represent the visual side of safety inthis study. Regular maintenance and cleaning are required inorder to minimise reputation loss.
Branding enables shopping centres to build up a positivereputation. The ones involved in this study mainly used publicevents and joint advertising to enhance their brands, relying onformal and informal store networks. Our findings did not confirmthe importance of store brands, which according to Liljander et al.(2009) deserve more research attention.
Negative economic trends lead to unemployment andincreased criminality: store sales decline and out-of-work peoplemay loiter in shopping centres for want of anything better to do.Any disorderly conduct would also be detrimental to the reputa-tion of the centre. Shoplifting was acknowledged as a majorproblem in all the stores: according to Bamfield (2009) andJarvinen and Uuspelto (2009) it is becoming more highly orga-nised and more professional, although non-professionals are alsovery active.
Tough competition is inherent in retailing, and not only fromthe inside, but also from the outside in the form of e-commerce.Nevertheless, many customers prefer traditional shoppingbecause of the higher prices and the logistics problems thatcurrently feature in e-commerce, as Koistinen and Jarvinen(2009) also note.
Negative publicity is another widely recognised reputation riskin shopping centres. Such publicity arises from incidents such asbomb threats, robberies, vandalism and various accidents as soonas the public hears about them. False alarms may also encouragepeople to avoid a particular shopping centre, simultaneouslyaffecting all the stores in it. The public’s perception of thesituation plays a large role, as Aula (2010) observes.
The results discussed above support Aula’s (2010) suggestionthat a loss of reputation may be direct or indirect, and theconsequences may affect many functions: in the retailing contextone thing may lead to another up to the point at which the mediaget hold of the story.
The implication of the above is that there should be a strongerfocus on reputation management in shopping centres. Naturally,not all risks can be predicted, but as Gaultier-Gaillard and Louisot(2006) suggest, stores could be better prepared.
5.2. Reputation risks in higher education
Risks to reputation in the higher-education context are alsoboth internal and external in nature, arising from the educationalprogramme and its content in the former case, and from thesurrounding society and environment in the latter. As in retailing,both could be categorised as positive or negative. Table 4 sum-marises the results of the survey and the interviews with regardto higher education. The categories are discussed briefly below.
5.2.1. Positive and negative internal reputation risks
It seems that students on the Master’s degree programme inquestion value the networks they form during the course of it.They typically have some work experience, and given the inclu-sion of students with business and art-related backgrounds, manyinteresting projects have emerged from course assignments orleisure-time pursuits.
According to the students, the level of teaching in the pro-gramme varies. It is a small community, and one person whosepedagogical skills and qualifications the students consider inade-quate may constitute a reputation risk. The same applies tostudent counselling and other support services. However, mostof the student respondents were satisfied with the counsellingthey received.
The staff, in turn, stressed the need for teaching on academicprogrammes to be based on well-organised research focused onextensive publishing in far-reaching academic journals, and forthe maintenance of strong ties with academic communities.
The core idea and competitive advantage of the programme liein the totally new way of combining the disciplines of businessand art and operating at their interface. A reputation threat wouldtherefore arise if it did not offer added value and something thatwas unique, differing from the basic studies in both. One of thebiggest perceived reputation risks was that the staff would losethe thread of the programme, and that their vision would becomeblurred.
There have been some conflicts in the multidisciplinary teamsattributable in part to the different rules, cultural values and waysof working. However, the team members have learned from eachother. Conflicts turn into risks if they become visible to studentsor other stakeholders, and particularly if they attract mediaattention.
The programme is still new, and although the informantsthought it still lacked general awareness, they also saw this asan opportunity in that there was much to be done in terms offurther promotion.
In the opinion of some of the interviewees, the lack of a leaderwho could be identified with the programme could lead to adecreasing level of support for it in the area. The students evenimplied that they did not know who the leader was, if therewas one.
Reputation risk could arise if the organising universities didnot prioritise the programme in terms of resource allocation.Furthermore, uncertainty about the key persons and the future ofthe programme constitutes a considerable risk. As Fombrun andvan Riel (1997, p.10) state, ‘‘Reputations develop from firms’ priorresource allocations and historiesy’’
The results imply that the programme is suffering from‘‘provinciality’’: both staff and students refer to excessively localthinking, acting and networking. Wæraas and Solbakk (2009)similarly refer to some departments in a Norwegian university assuffering from a ‘‘provincial way thinking’’. Indeed, some of ourinformants considered the location of the programme a problembecause of the distance from the nation’s capital and the transportconnections. The host city is described as somewhat boring, butnevertheless the staff associated it positively with regional valuesand cultural events.
Both staff and students expressed disappointment in the levelof internationalisation: the content is unique and should attractstudents from other countries, but producing courses in English isnot straightforward, and there is a lack of international aware-ness. Overall, the students had high and sometimes even unrea-listic expectations. This is in line with Beneke’s (2011) reasoningin the higher-education context concerning the risk involved ifthere is a discrepancy between the quality of the university andthe expectations of students.
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The students mentioned the possibility of fraud, such as a caseof plagiary, as potentially damaging to the reputation of theprogramme, particularly because it was still new. However, thestaff appeared to think that an isolated incident would notdo harm.
5.2.2. Positive and negative external reputation risks
Despite references (see e.g., Deephouse, 2000) to the organisa-tion’s ‘picture’ in the media and the impact on its reputation, fewinterviewees acknowledged the media’s role in building thereputation of the programme. There was some mention of therisk arising from any negative publicity in print and other media,but according to the marketing manager of the UC, the media hadtreated it extremely favourably in recent years. The host localityhad apparently improved its profile as a university town. Therewas also strong support for the UC and its universities and theirprogrammes in the host town and among those involved inregional development: this was important given the crucial needfor resources.
Interestingly, there is close collaboration between the orga-nisers of the programme and an annual international culturalevent that takes place in the town. The results imply that theevent’s strong, established brand has rubbed off on the pro-gramme’s fledgling brand. Given that the programme was notlaunched until 2009, this is significant, although employers,businesses and potential students still seem to lack awarenessof it.
Some of the interviewees suggested that positive word-of-mouth could enhance awareness of the programme and itsreputation. Interestingly, neither the interviewees nor the surveyrespondents mentioned social media and the risks involved. Thisis surprising given that students are active users of social media,and some of them have blogs focusing on their studies. Indeed,the power of online social blogs is recognised among marketingscholars (Aula, 2010; Li and Du, 2010). One problem, according toAula (2010), is that users generate and disseminate unverifiedinformation – both true and false.
Both staff and students were positive about the career pro-spects of graduates of this unique programme, particularly giventheir other qualifications and work experience. As some of theinterviewees mentioned, however, the inability of graduates tofind a job that was commensurate with their qualifications woulddamage its reputation.
Some of the staff saw a threat in the fact that the programmewas partly dependent on external financial resources.
5.3. The stakeholder perspective
Given that managing reputational risks requires ‘‘a sustaineddialogue with stakeholders’’ (Young and Hasler, 2010, p. 45; seealso De Chernatony, 1999), an organisation must be able toidentify its stakeholders. Our study findings confirmed the pre-sence of customers, employees, shop owners and suppliers amongthe main stakeholders in retailing. The shopping centre’s manage-ment, together with the whole business community comprisingother shop owners and their employees, also play a major role inthis environment, whereas the role of the media and publicservice providers is minor.
According to Vidaver-Cohen (2007), in the context of businessschools stakeholders include students, alumni, employers, facultyand the business community, the parent university, externalevaluators (accreditation agencies/administrative peers) andscholarly peers. Kotler and Fox (1995) add prospective students,the parents of prospective and current students, competitors,government agencies, the media and the general public. Our
results imply that of these, the parents of students and prospec-tive students do not comprise a major stakeholder group in theFinnish context. Moreover, alumni do not play as significant a rolein Finland as in the major English-speaking countries (cf.McAlexander et al., 2004).
In addition to the above, members of the public are able toexpress their views for or against any event undertaken by anyorganisation. This often first comes to light in the social media,spreading thereafter to the printed media and collective action.Murray (2003, p.142) even claims that reputation risk demon-strates ‘‘the recognition that the power of the collective opinionsof the man and woman in the street has the potential to bring abusiness to its knees in a way that other business risks rarelythreaten’’. However, our study findings indicate that organisationsseldom think of laymen as primary stakeholders in terms ofreputation.
6. Discussion and conclusion
6.1. Theoretical implications
Although much has been written about reputation in terms ofits significance (e.g., Fombrun, 1996; Nguyen & LeBlanc, 2001), itstheoretical construct (e.g., Chun, 2005; Walker, 2010) and man-agement (e.g., De Chernatony, 1999), literature focusing onreputation risks is scarce. Moreover, studies are typically theore-tical and conceptual in nature (e.g., Scandizzo, 2011), and fallshort in ascertaining concrete risks. The theoretical aspect isclearly important, but does not give an adequate picture of thismultifaceted phenomenon. Thus, the novelty of this article lies inits empirical contribution through identifying actual reputationrisks threatening organisations operating in the service field. Ourfocus on two notably dissimilar contexts from both the privateand the public sector makes the findings more robust andrelevant, and sheds light on a hitherto overlooked but highlysignificant area of research.
The framework proposed in this article builds on the earlierliterature on reputation risks, and the results of the studysupport their categorisation as internal or external, and theirfurther division as positive or negative. However, a comparisonof the contents of Tables 3 and 4 indicates that the two sectorsin question, i.e. retailing and higher education, produce twoquite different pictures. Further comparison with the sugges-tions of O0Callaghan (2007) set out in Table 1 confirms thiscontext-dependent variation. We therefore conclude that repu-tation risks are context-specific and unique to the service inquestion.
Despite the similarities between the two service sectors(see Tables 3 and 4), the main contents of risk vary consider-ably. Specific risks to the retailing stores are linked to theirlocation in shopping centres. We can thus conclude that theexternal risks are attributable primarily to the reputation ofthe shopping centre, and secondly to changes in society. Themost significant risks in the higher-education context turnedout to be internal, specifically related to the content of theprogramme and the quality of the teaching. There wereapparent gaps between the students’ expectations, some ofwhich may have been unrealistic, and their experience of theprogramme.
We also found positive and negative aspects of reputation risk,and more of a tendency towards the negative in higher educationthan in retailing. Many of the categories in higher education hadboth positive and negative aspects, whereas in retailing thepositive and the negative were distinct, and the respondentstended to recognise more positive risks. One conclusion is thus
K. Suomi, R. Jarvinen / Journal of Retailing and Consumer Services 20 (2013) 207–217214
that the retail sector is able to turn threats into positiveopportunities.
6.2. Managerial implications
Given that reputation risks appear to be less predictable thanmany other kinds of risk, organisations should strive to identifyand prepare for them. In the retailing context such risks do notgenerally give rise to serious concern unless there is a potentialloss of reputation, although any negative risk could have seriousimplications if it is ignored. In the higher-education context werecommend focusing more on ensuring that students’ expecta-tions of the programme are realistic. In-depth discussion witheach new student at the beginning should help. Our results alsohighlight the need for continuous, effective programme evalua-tion and auditing.
Scott and Walsham (2005, p. 308) refer to former approachesto reputation risk as rather ‘‘static, asset oriented, and reactive’’.We therefore recommend a proactive approach to risk avoid-ance. Our findings point to a tendency for such risks to arise inprocesses that resemble the so-called Domino effect. We believethat both the framework of our study and the result tables couldbe used as a practical risk-management tool in service organisa-tions, particularly in retailing and higher education. Finally, themanagement of reputation risk does not necessarily requirelarge investments, and many tasks can be taken care of at‘almost no cost at all’. What is crucial is having the rightattitude.
6.3. Limitations and future research
Further studies should focus on customers, who constitute asignificant stakeholder group in retailing in particular. In highereducation the perspective could extend to other key groups suchas potential students, the media and employers. Moreover, giventhe focus here on two service industries in one country, futureresearch should address reputation risks in other service contexts,and in other countries and cultures.
Finally, we acknowledge the limitations of the study. All theretail stores involved were located in shopping centres, andisolated shops or those located in main streets may have pro-duced somewhat different results. Moreover, the higher-education data covered just one Master0s degree programme,and the results cannot be generalised to all types of educationalinstitutions and courses of study. There is thus a need to conductquantitative studies covering a variety of higher-education pro-grammes and retailing outlets, for example.
Appendix A. The questionnaire for students on the Master’sdegree programme
1.
With which members of the programme staff do you co-operate and how would you describe these people?2.
How would you describe the reputation of the Master’sdegree programme?3.
How would you describe the research on which the pro-gramme is based?4.
In your opinion, what kinds of students apply for a place onthe programme?5.
Do you think that the Master’s programme gives its studentsemployment opportunities?6.
How would you describe relationship between the pro-gramme and the business community?7.
Would you pay for a study trip if it added value to your studies?8.
How do you perceive your employment opportunities aftergraduation?9.
Do you think that students will acquire skills during theprogramme that employers will appreciate?10.
Who gives you study counselling? What kind of counsellingand other support do you think students get? How effective isit?11.
What do you think the students receive in return for theirfinancial investment?12.
What kind of people do you think graduate from theprogramme?13.
How do you think the programme takes into account theachievements and capabilities of the students?14.
Who are the leaders of the programme? How would youdescribe them?15.
How would you describe their capabilities? 16. In your opinion, what kind of visions do the staff planning andimplementing the programme have of its future?
17. How would you describe the administration of theprogramme?
18. What negative events do you think would harm the pro-gramme, such as if students copy course assignments?
19. What are the programme’s stakeholder groups? 20. How would you describe the co-operation between thestakeholder groups and the programme?
21. How would you describe the innovativeness of thecurriculum?
22. How would you describe the innovativeness of the way ofworking?
23. Do you think this programme adapts to changes easily?Questions related to your own school/department:
24. Do you think your school/department can offer employmentopportunities to its students?
25. How would you describe the relationships between yourschool/department and the business community?
26. How would you describe the relationships between yourschool/department and the alumni?
27. How do you see the financial situation of your school/department?
28. How do you think your school/department rewards itsemployees?
29. How would you describe the job satisfaction and the amountsof sickness absence of the employees in your school/department?
30.
Do you think your school/department adapts to changeseasily?31.
How would you describe your school/department in terms ofcorporate social responsibility? How does it show?32.
Do you consider yourself primarily a student of this pro-gramme or a student of a school of economics/department ofart and media?33.
When you applied for this programme was it specifically onaccount of the programme or because it was a school ofeconomics/ a department of art and media?Your unit (check):School of economics &Department of art and media &
Appendix B. The interview protocol in higher education
1.
Would you please first describe your own role within theMaster’s degree programme?2.
With which members of the programme staff do you co-operate and how would you describe these people?
K. Suomi, R. Jarvinen / Journal of Retailing and Consumer Services 20 (2013) 207–217 215
3.
TablQuo
Re
Chb
CoDiITLeLoNe
NePePrQuSaSh
ShSh
mSh
Sto
StoSto
mTrW
How would you describe the reputation of the Master’sdegree programme?
4.
How would you describe the research on which the pro-gramme is based?5.
In your opinion, what kinds of students apply for a place onthe programme?6.
Do you think the Master’s programme gives its studentsemployment opportunities?7.
What you think about the employability of these studentsafter they have graduated from the programme?8.
How would you describe the relationship between the pro-gramme and the business community?9.
How would you describe the co-operation with the localbusiness community in the context of the programme?10.
What kind of special skills do you think students will acquirethat potential employers will appreciate?11.
What kind of study counselling and other support do thestudents get? How effective do you think it is?12.
What do you think the students receive in return for theirfinancial investment?13.
What kind of people graduate from the programme? 14. How do you think the programme takes into account theachievements and capabilities of the students?
15. Who are the leaders of the programme and how would youdescribe them and their capabilities?
16. What kind of visions do the staff planning and implementingthe programme have of its future?
17. How would you describe the administration of the programme? 18. What negative events do you think would harm the pro-gramme, such as if students plagiarised course assignments?
19. What are the programme’s stakeholder groups? What shouldthey be?
20. How would you describe the co-operation between thestakeholder groups and the programme?
21. How would you describe the innovativeness of the pro-gramme in terms of the curriculum, the teaching methodsand the ways of working?
e C1tations exemplifying the classification of reputation risks in retailing.
putation risk category Quotation
anging customer purchasingehaviour
‘‘By assortment and pricing.’’ (MC)
mpetition ‘‘Internet shopping, it brings more pressure. Peo
sruptive customers ‘‘We have fragile products for sale. If somebody
safety ‘‘It’s a questionnaire we fill it in and look at it t
adership & working climate ‘‘I am responsible for my staff.’’ (P)
cation ‘‘Running a business in the city centre has its o
gative economic trends ‘‘Product prices have decreased. Customers don
‘‘Losing your job. It seems to be very common n
gative publicity ‘‘No doubt there have been at least some bomb
rsonnel capability ‘‘You can always expect staff to show initiative.
oducts ‘‘Guarantees take 30 per cent of the shop owne
ality of work ‘‘Problems with customers are settled 99 per ce
fety equipment ‘‘CCTV is installed around the store and it also c
oplifting ‘‘Shoplifting is something that happens every da
‘‘Shoplifting of two brands brings a 10-per-cent
opping-centre branding ‘‘To be able to choose the most effective advert
opping-centre estate and itsaintenance
‘‘Cleaning is one matter that is discussed.’’ (MM
opping-centre physical space ‘‘A lot of exits and wide passages.’’ (E)
‘‘The biggest thing is the common security.’’ (H)
re design ‘‘This is such a small shop and we have so man
though there should be empty space.’’ (O)
re network ‘‘I see this as a kind of symbiotic task, to be abl
re operations andaintenance
‘‘Yes the late night shifty not to be alone then
ansport ‘‘When we have big events there is not enough
ell-being and ergonomics ‘‘Sick leave and accidents. They are the things I
22.
ple b
star
ogeth
wn ri
’t spe
owa
thre
’’ (K)
r’s tim
nt by
ontr
y.’’ (
profi
ising
)
y pro
e and
.’’ (M
park
wou
Do you think this programme adapts to changes easily?
23. When students apply for this programme, do you think it isspecifically on account of the programme or because it isassociated with a school of economics/ a department of artand media?
24.
How would you describe the financial situation of theprogramme?25.
Do the students consider themselves primarily as students ofthe programme or as students of a school of economics/ adepartment of media and art?26.
How well do you think this programme rewards its employees? 27. How would you describe the job satisfaction and the amountsof sickness absence of the employees?
28. How would you describe the loyalty and the staffturnover within this programme? Do you think thatemployees have equal self-development and careeropportunities?
29.
How would you describe this programme’s effects on localsociety in terms of corporate social responsibility and ethics,for example?30.
How would you describe this programme in terms of corpo-rate social responsibility and ethics?31.
How do you think the location affects the reputation of theprogramme? What about the reputation of the UniversityCentre and its standing within the HE market?32.
How is student feedback taken into consideration? 33. What kind of reputation-related risks might be related to thiskind of programme?
34. Do you have anything else to say about the reputation of theprogramme?
Appendix C
See Table C1.
uy more and more on the net, at least in our industry.’’ (Q)
ts a fight, the outcome is a terrible mess.’’ (D)
er’’. (A)
sks, I have to admit that.’’ (L)
nd money.’’ (R)
days.’’ (G)
ats over the years.’’ (K)
e.’’ (SM)
behaving in a friendly but determined manner.’’ (B)
ols staff performance.’’ (G)
L)
t loss.’’ (J)
channel to bring people into the shopping centre.’’ (R)
ducts for sale that we have to put some of them in front of the door, even
willing to help each other.’’ (D)
)
ing space.’’ (SK)
ld like to stop.’’ (H)
Table D1Quotations exemplifying the classification of reputation risks in higher education.
Reputation riskcategory
Quotation
Co-branding ‘‘The town is known for the festivalyand the festival’s reputation is positiveywe are like ‘under the wing of the festival. It’s quite good for us.
In a way it supports the programme. It’s a kind of a good ‘reputation shoulder’ for us ‘‘(Interviewee 6)
Conflicts ‘‘Almost throughout the history of this programme there have been ‘dramatic’ turns of events, particularly related to these collisions between
people’’ (Interviewee 6)
Duration ‘‘It’s challengingyWill people understand what kind of people these students are?’’ (Interviewee 4)
‘‘This is such a new programme that nobody knows about it outside academia’’ (Student respondent 28)
Employment ‘‘My expectations are high [about career prospects]’’ (Student respondent 30)
Expectations ‘‘There are even kind of frightening expectationsywe do this with very few resources, so are we able to fulfil all the expectations of this
programme?’’ (Interviewee 1)
‘‘I have had value for my money but I still expected much more of the programme’’ (Student respondent 7)
Fraud ‘‘I think it would have a huge effect. This is a small programme and wouldn’t withstand any stains’’ (Student respondent 22)
Informalcommunication
‘‘This is a new and quite different [programme]yand has not achieved ‘full’ awareness in Finland. But when more students graduate, they will
speak about it and the word will spready’’ (Interviewee 7)
Internationality ‘‘Is arranging courses in English really that difficult??? (Student respondent 31)
Leadership ‘‘Who personifies it [the programme]? yit doesn’t have a strong ‘face’’’ (Interviewee 2)
‘‘I don’t know who are the leaders [of the programme]’’ (Student respondent 13)
Location ‘‘It is both good and bad’’ (Interviewee 1)
Provinciality ‘‘To be honest, we suffer from ‘provinciality’. We have not been able make the programme international enough.’’ (Interviewee 1).
Publicity ‘‘I think any negative reportage about the programme would harm its reputation’’ (Interviewee 8)
Quality ‘‘If students were to spread it about that they didn’t get anything from the programme and that the content is boring, I think that would be
fatal.’’ (Interviewee 3)
‘‘I’m not quite satisfied with the teaching’’ (Student respondent 29)
Resources ‘‘I think it’s quite sad [the financial situation] (Student respondent 5)
Services ‘‘I guess I get counselling when I need it ybut it is not offered proactively’’ (Student respondent 24)
Strategy ‘‘It is a risk if it [the programme] is not properly taken into account in the strategy’’ (Interviewee 2)
Student network ‘‘One very important thing is the students’ interpersonal networkythey [students] appreciate that they can meet each other here’’
(Interviewee 3)
Uncertainty ‘‘I’m waiting to see if they extend my contract in January. I don’t know if I’ll be working after Christmas’’ (Interviewee 1)
‘‘I wonder if this programme has a future. I hope so, because it would be quite embarrassing to graduate from a programme that does not exist
anymore’’ (Student respondent 27)
Uniqueness ‘‘I think it is the biggest reputation risk if the main thread of the programme’s content is missing’’ (Interviewee 10)
‘‘I remember one applicant from Singapore. She lived in New York. She told us that she had searched on Google for all possible programmes.
She wanted to combine design and art with business and entrepreneurshipy. She said that she found two, one in New York and the other was
this programme in Finland’’ (Interviewee 1)
K. Suomi, R. Jarvinen / Journal of Retailing and Consumer Services 20 (2013) 207–217216
Appendix D
See Table D1.
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